Monday, April 6, 2009

I take my hat off to this very astute Quebec resident who pointed out the following gems to me over the weekend:

Brent:

Read Sabia’s article from several months ago in “Crash and Recovery” in the Globe (available to subscribers online).

In it he says a) government needs smart people (he was obviously in talks with Charest at the time, since he must have been laying the seeds of his self-justification) and b) we live in a perpetually low return world (whereupon equities rise by 25% from the time he uttered his words, which shows what a good asset manager he’ll make)

One of the big issues in quebec is the timing of the appointment. Charest claims the board appointed sabia. The facts speak otherwise. As the piece in the globe would tend to show, the job was lined up long before the board had ever heard of his possible appointment.

Btw I trust you know the connect here: paul teller is really close to sabia (you knew that) but also to charest (part of the mulroney gang). And of course sabia is the guy who appointed marc tellier (the son of the other one) to head up yellow pages...

Sabia was part of Tellier’s privy council. When Tellier was put in for CN he took Sabia with him. When Monty took over at BCE and needed to get Derek Burney (former chief of staff to mulroney) out of BCI, it was Tellier who proposed Sabia (Red Wilson took care of Derek ,with Derek going to CAE as CEO).

It’s all very Canadian. It’s not a meritocracy. It’s a system of reciprocity.

To which I responded:

Yes I was aware of that “horse trade” that took place. In fact I offered to host a reception for Derek when he moved to Toronto from Montreal to take up his new job at CAE. Instead Red Wilson picked up on the idea, and so I simply attended. Surprisingly, my good fortune saw to it that I did deals with each one of these people you have mentioned. While at BMO, I was the lead banker on the $500 million IPO of BCI (when Burney was CEO) and an equally large post-IPO follow up deal for CN (when Tellier was CEO and Sabia was CFO). The “horse trade” took place not too long after that deal. I got the impression from working closely on that deal with Sabia that he was getting restless.

I only met Marc Tellier on one occasion (at which point Sabia had become CEO of BCE), and we were pitching BCE on taking Yellow Pages public via an income trust. Instead, Sabia decided to sell Yellow Pages to KKR for 50 cents on the dollar, and less than 6 months later KKR took Yellow Pages public via an income trust, resulting in the highest yielding investment in the history of KKR. Good for KKR. Bad for BCE. Maybe it’s deals like that which uniquely qualify Sabia to run the Caisse? Buy high. Sell low....as the means to leave a billion dollars on the table?

Thanks for making the connection to the Sabia “Op Ed” in the Globe, as I had completely forgotten about it. I’ll have to go back and read it and see if it talks about the strategy of Buy high Sell low. I only got half way through it at the time. The tortured sentence structure and convoluted logic was giving me a headache, but in light of subsequent events, it takes on new significance and is probably worth the bore.

I wonder how many of the other candidates who were in consideration to become CEO of the Caisse, of which there was only one token alternative candidate, was given the opportunity to write an article in the Globe and Mail to groom the market for his eventual anointment? LOL

My use of the term “groom the market” is not by accident, as this is the term used to generically describe any practice in the stock marketplace in which unsavory market players engage in types of activities, that if properly disclosed, would make what they are trying to achieve more difficult and more costly. Such practices are, by the way, illegal.

I would also think that “grooming the market”, should also be considered an illegal practice when used in the context of seeking a job as head of Quebec’s pension fund, or any job involving the public trust. But such is not the Caisse.

Apart from Michael Sabia being grossly unqualified for this job, and the fact that the process (if you can even call it that) by which he was selected was a farce, now we learn that the market was being groomed and people in Quebec and elsewhere were basically being “gamed” through this, seemingly, coordinated stealth campaign to install Michael Sabia in an important role for which he is not qualified.

How interesting of you to observe that Michael Sabia, through his connections to BCE and their ownership of the Globe and Mail, through CTVGlobeMebia, was able to secure for himself a spot in the paper to preach his wares in advance of game day, so to speak.

This is exactly what we observed in the case of the income trust tax and the roll-out of positions on this bespoke public policy, that was custom designed to achieve the ends of the paper’s owners and others of influence. Meanwhile, public market participants be damned. The very public markets that Michael Sabia is now vying to become a bigger player in, using many of the same heavy handed practices and pulling of government strings. God help us.

The Globe’s handling of the income trust issue is downright criminal in the manner in which they have conflated the issue and acted as an organ/mouthpiece for those narrow interests and corporate managers who sought to kill the superior trust structure against which they were unable to compete. Instead they used the Glibe and Mal as the means to promulgate the endless repetition of central falsehoods, such as Jack Mintz’s erroneous tax leakage numbers and giving air play to objections being proffered up by people who would normally be laughed out of the room. Which brings me back to the topic of Michael Sabia

I think you have hit the nail on the head (or hopefully the nail in the coffin) when you described what Sabia’s proposed appointment to the Caisse truly is symptomatic of, namely:

“It’s all very Canadian. It’s not a meritocracy. It’s a system of reciprocity.”

That observation alone, together with the evidence that supports it, should be more than enough to crater Sabia’s new professional jaunt into things he knows nothing about and his latest incarnation as a Portfolio Management guru?

The whole issue boils down to being one of a Caisse of Bad Governance. Worse than the fact that Sabia’s selection was a rush to judgment, is the fact that it was a rush to reciprocity. The old boy’s network is alive and well.

The same Caisse of Bad Governance that led to their reckless foray into ABCP has now become a Caisse of Bad Governance that has led to Sabia’s (possible) appointment. It is remotely conceivable that Michael Sabia could have been the best candidate to fill this position, but that would have required that the criteria for the job have been established at the outset and an exhaustive list of candidates be sought to fill those criteria.

Such, however was not the Caisse. That would have been a Caisse of Meritocracy, rather than a Caisse of Reciprocity Hence the outcome of this flawed process that must be rejected. Michael Sabia should have no problem with that, if his comment about wanting to make a contribution to the public good, is to be believed?

Here’s that piece of self serving nonsense that Sabia had planted in the Globe in an effort to groom the market in advance of what was already his new job. I wouldn’t want you to pay for the piece on line, since the Globe is economically sustained by all the favours it does for big business and BFF’s, like Michael Sabia:Plain talk: Leading through the tough times

MICHAEL SABIAGlobe and MailMarch 6, 2009

Michael Sabia has worked in both the public and private sectors in Canada - most recently as CEO of BCE.

A few weeks ago, Tom Daschle quit as the nominee to lead the U.S. Department of Health and Human Services. A bad day for a fledgling administration. Barack Obama responded simply: "I screwed up." His words were plain, direct, approachable. Familiar, casual language. That may seem a small thing, and at one level, it is.

The full text of this article has 985 words.

To continue reading this article, you will need to purchase this article.

EVENTS

Income Trust Halloween VigilThanks to all who participated in both the Ottawa and Calgary vigils to mark the anniversary of the announcement.

WE"D LIKE SOME ANSWERS

As you well know, the ‘income trust thing’ has grown beyond the
question of whether fair taxes are paid on income from trusts. It’s
become a giant dirty snowball, and as it rolls forward it accumulates
more and more bulk. There are so many unanswered questions. Let's list a few and invite our "Accountable" government and our free press to provide some much-needed answers.

It is said “Trusts are inefficient use of capital. Why?” Two
related questions are ‘Whose money is it, anyway?’, and ‘Do Canadian
investors have a free and efficient market?’

How can information that is already in the public domain at SEDAR
make for a state secret? How could such information be used to harm
the Canadian national interest? And who would cause the harm?

Why won’t the Canadian media investigate the falsehoods and
misrepresentations told by the Minister of Finance to a committee of
Parliament? Was the Minister in contempt of Parliament?

Why won’t the Canadian media report (a) government tax revenues
gained from BCE in 2006 when BCE was a corporation to (b) government
tax revenues that would be gained in 2007 from BCE, if BCE had been
allowed to proceed to a trust, and (c) government tax revenues that
will be gained in 2007 from BCE, when BCE ownership has been carved
up as 45% foreign ownership and 55% large Canadian pension fund
ownership?